$250,000,000 (10,000,000 Shares) Non-cumulative 5-Year Rate Reset Preferred Shares Series 26

Transcription

1 Prospectus Supplement To the Short Form Base Shelf Prospectus Dated April 16, 2008 as amended by Amendment No. 1 dated December 3, 2008 This prospectus supplement, together with the short form base shelf prospectus dated April 16, 2008 as amended by Amendment No. 1 dated December 3,2008 (collectively, the prospectus ) to which it relates, as further amended or supplemented, and each document incorporated by reference into this prospectus supplement or the accompanying prospectus, constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. These securities have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the U.S. Securities Act ) or any state securities laws and, subject to certain exceptions, may not be offered, sold, or delivered, directly or indirectly, in the United States of America, its territories or possessions, or for the account or benefit of U.S. persons. See Plan of Distribution. Information has been incorporated by reference in this prospectus supplement and the accompanying prospectus from documents filed with the securities commissions or similar authorities in Canada. See Documents Incorporated by Reference. Copies of the documents incorporated herein or therein by reference may be obtained on request without charge from the Executive Vice-President, General Counsel and Secretary, The Bank of Nova Scotia, Scotia Plaza, 44 King Street West, Toronto, Ontario M5H 1H1, telephone: (416) and are also available electronically at New Issue January 9, 2009 $250,000,000 (10,000,000 Shares) Non-cumulative 5-Year Rate Reset Preferred Shares Series 26 The holders of Non-cumulative 5-Year Rate Reset Preferred Shares Series 26 (the Preferred Shares Series 26 ) of The Bank of Nova Scotia (the Bank ) will be entitled to receive fixed non-cumulative preferential cash dividends, as and when declared by the board of directors of the Bank (the Board of Directors ), for the initial period commencing on the Closing Date (as defined herein) and ending on and including April 25, 2014 (the Initial Fixed Rate Period ), payable quarterly on the third last business day of January, April, July and October in each year (other than January 28, 2009), at an annual rate equal to $ per share. The initial dividend, if declared, will be payable April 28, 2009 and will be $ per share, based on the anticipated closing date of January 21, 2009 (the Closing Date ). Reference is made to Details of the Offering. For each five-year period after the Initial Fixed Rate Period (each a Subsequent Fixed Rate Period ), the holders of Preferred Shares Series 26 will be entitled to receive fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors, payable quarterly on the third last business day of January, April, July and October in each year, in the amount per share per annum determined by multiplying the Annual Fixed Dividend Rate (as defined herein) applicable to such Subsequent Fixed Rate Period by $ The Annual Fixed Dividend Rate for the ensuing Subsequent Fixed Rate Period will be determined by the Bank on the 30 th day prior to the first day of such Subsequent Fixed Rate Period and will be equal to the sum of the Government of Canada Yield (as defined herein) on the date on which the Annual Fixed Dividend Rate is determined plus 4.14%. Reference is made to Details of the Offering. Option to Convert Into Preferred Shares Series 27 The holders of Preferred Shares Series 26 will have the right, at their option, to convert their shares into Non-cumulative Floating Rate Preferred Shares Series 27 of the Bank (the Preferred Shares Series 27 ), subject to certain conditions, on April 26, 2014 and on April 26 every five years thereafter. The holders of Preferred Shares Series 27 will be entitled to receive floating rate non-cumulative preferential cash dividends, as and when declared by the Board of Directors, payable quarterly on the third last business day of January, April, July and October in each year (the initial quarterly dividend period and each subsequent quarterly dividend period is referred to as a Quarterly Floating Rate Period ), in the amount per share determined by multiplying the applicable Floating Quarterly Dividend Rate (as defined herein) by $ The Floating Quarterly Dividend Rate will be equal to the sum of the T-Bill Rate (as defined herein) plus 4.14% (calculated on the basis of the actual number of days elapsed in the applicable Quarterly Floating Rate Period divided by

2 365) determined on the 30 th day prior to the first day of the applicable Quarterly Floating Rate Period. Reference is made to Details of the Offering. Subject to the provisions of the Bank Act (Canada) (the Bank Act ) and to the prior consent of the Superintendent of Financial Institutions Canada (the Superintendent ) and to the provisions described below under Details of the Offering Certain Provisions of the Preferred Shares Series 26 as a Series - Restrictions on Dividends and Retirement of Shares, on April 26, 2014 and on April 26 every five years thereafter, the Bank may redeem all or any part of the then outstanding Preferred Shares Series 26, at the Bank s option without the consent of the holder, by the payment of an amount in cash for each such share so redeemed of $25.00 together with all declared and unpaid dividends to the date fixed for redemption. Reference is made to Details of the Offering. The Preferred Shares Series 26 and the Preferred Shares Series 27 do not have a fixed maturity date and are not redeemable at the option of the holders of Preferred Shares Series 26 or Preferred Shares Series 27. Reference is made to Risk Factors. The Bank has applied to list the Preferred Shares Series 26 and the Preferred Shares Series 27 on the Toronto Stock Exchange (the TSX ). Listing will be subject to the Bank fulfilling all of the requirements of the TSX. The Bank was granted a charter under the laws of the Province of Nova Scotia in 1832, and commenced operations in Halifax, Nova Scotia in that year. Since 1871, the Bank has been a chartered bank under the Bank Act. The Bank is a Schedule I bank under the Bank Act and the Bank Act is its charter. The head office of the Bank is located at 1709 Hollis Street, Halifax, Nova Scotia, B3J 3B7 and its executive offices are at Scotia Plaza, 44 King Street West, Toronto, Ontario, M5H 1H1. Price: $25.00 per share to yield initially 6.25% per annum Scotia Capital Inc., RBC Dominion Securities Inc., BMO Nesbitt Burns Inc., CIBC World Markets Inc., TD Securities Inc., Desjardins Securities Inc., National Bank Financial Inc., HSBC Securities (Canada) Inc., Blackmont Capital Inc., Dundee Securities Corporation, Laurentian Bank Securities Inc., Brookfield Financial Corp. and Manulife Securities Incorporated (collectively, the Underwriters ), as principals, conditionally offer the Preferred Shares Series 26, subject to prior sale if, as and when issued by the Bank and accepted by the Underwriters in accordance with the conditions contained in the Underwriting Agreement referred to under Plan of Distribution and subject to the approval of certain legal matters on behalf of the Bank by McCarthy Tétrault LLP and on behalf of the Underwriters by Osler, Hoskin & Harcourt LLP. Scotia Capital Inc., one of the Underwriters, is an indirect wholly-owned subsidiary of the Bank. The Bank also has an approximate 35.5% equity interest in CI Financial Corp., of which Blackmont Capital Inc., one of the Underwriters, is an indirect wholly-owned subsidiary. The Bank also has an approximate 19.4% equity interest in, and the right, in certain circumstances, to nominate directors to the board of directors of, Dundee Wealth Inc., of which Dundee Securities Corporation, one of the Underwriters, is an indirect wholly-owned subsidiary. Therefore, the Bank is a related issuer of Scotia Capital Inc., Blackmont Capital Inc. and Dundee Securities Corporation under applicable securities legislation. Reference is made to Plan of Distribution. Price to the Public Underwriting Fees (1) Net Proceeds to the Bank (2) Per Share... $25.00 $0.75 $24.25 Total... $250,000,000 $7,500,000 $242,500,000 (1) The underwriting fee is $0.25 for each share sold to certain institutions and $0.75 per share for all other shares sold. The total represents the underwriting fee assuming no shares are sold to such institutions. (2) Before deducting expenses of this offering, estimated at $400,000. (3) The Bank has granted to the Underwriters an underwriters option (the Option ) to purchase up to an additional 3,000,000 Preferred Shares Series 26 at the offering price hereunder, exercisable at any time up to 48 hours prior to 9:00 a.m. (Toronto time) on the Closing Date, anticipated to be January 21, If the Option is exercised in full, the total Price to Public, Underwriting Fee and Net Proceeds to the Bank, before deducting expenses of the offering, would be $325,000,000, $9,750,000 and $315,250,000, respectively (assuming no Preferred Shares Series 26 are sold to those institutions referred to in (1) above). This prospectus supplement qualifies the grant of the Option and the distribution of the Preferred Shares Series 26 issuable upon exercise of the Option. Reference is made to Plan of Distribution.

3 A purchaser who acquires Preferred Shares Series 26 forming part of the Underwriters over-allocation position acquires those securities under this prospectus supplement, regardless of whether the over-allocation position is ultimately filled through the exercise of the Option or secondary market purchases. Underwriters Position Maximum Size Exercise Period Acquisition Price Underwriters option 3,000,000 Up to 48 hours prior to 9:00 a.m. $25.00 (Toronto time) on the Closing Date In connection with this offering, the Underwriters may over-allot or effect transactions which stabilize or maintain the market price of the Preferred Shares Series 26. Reference is made to Plan of Distribution. Subscriptions will be received subject to rejection or allotment in whole or in part and the right is reserved to close the subscription books at any time without notice. It is expected that closing will take place on January 21, 2009 or such later date as may be agreed upon, but in any event not later than February 20, A book-entry only certificate representing the Preferred Shares Series 26 distributed hereunder will be issued in registered form to CDS Clearing and Depository Services Inc. ( CDS ), or its nominee, and will be deposited with CDS on closing of this offering. No physical certificates representing the Preferred Shares Series 26 will be issued to purchasers, except in limited circumstances, and registration will be made in the depository service of CDS. A purchaser of Preferred Shares Series 26 will receive only a customer confirmation from the registered dealer who is a CDS participant and from or through whom the Preferred Shares Series 26 are purchased. Reference is made to Book-entry Only Securities.

4 Table of Contents Page Prospectus Supplement About this Prospectus Supplement... S-4 Forward-looking Statements... S-5 Documents Incorporated by Reference... S-5 Eligibility for Investment... S-6 Currency and Accounting Information... S-6 Recent Events... S-6 Details of the Offering... S-7 Consolidated Capitalization of the Bank... S-14 Earnings Coverage... S-15 Book-entry Only Securities... S-15 Ratings... S-15 Plan of Distribution... S-16 Canadian Federal Income Tax Considerations... S-17 Use of Proceeds... S-19 Prior Sales... S-19 Trading Price and Volume of the Bank s Securities... S-19 Transfer Agent and Registrar... S-21 Risk Factors... S-21 Legal Matters... S-22 Certificate of the Underwriters... S-23 Appendix A Auditors Consent Prospectus Forward-looking Statements...3 Documents Incorporated by Reference...4 Currency and Accounting Information...5 Business of the Bank...5 Share Capital and Subordinated Indebtedness of the Bank...5 Description of the Debt Securities...5 Description of Preferred Shares...6 Book-entry Only Securities...7 Bank Act Restrictions and Restrictions on Payment of Dividends...8 Earnings Coverage...9 Plan of Distribution...9 Risk Factors...10 Use of Proceeds...10 Interests of Experts...10 Purchasers Statutory Rights...10 Certificate of the Bank...11 Appendix A Auditors Consent Amendment No.1 dated December 3, 2008 to Prospectus Description of Common Shares... A-1 About this Prospectus Supplement This document consists of two parts, the first part is this prospectus supplement, which describes the specific terms of this offering. The second part, the accompanying prospectus, gives more general information, some of which may not apply to this offering. If information in this prospectus supplement is inconsistent with the accompanying prospectus, investors should rely on the information in this prospectus supplement. This prospectus supplement, the accompanying prospectus and the documents incorporated by reference into each of them include important information S-4

5 about the Bank, the preferred shares of the Bank being offered and other information investors should know before investing in the Preferred Shares Series 26 and Preferred Shares Series 27. Forward-looking Statements The Bank s public communications often include oral or written forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may include comments with respect to the Bank s objectives, strategies to achieve those objectives, expected financial results (including those in the area of risk management), and the outlook for the Bank s businesses and for the Canadian, United States and global economies. Such statements are typically identified by words or phrases such as believe, expect, anticipate, intent, estimate, plan, may increase, may fluctuate, and similar expressions of future or conditional verbs, such as will, should, would and could. By their very nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward-looking statements will not prove to be accurate. Do not unduly rely on forward-looking statements, as a number of important factors, many of which are beyond the Bank s control, could cause actual results to differ materially from the estimates and intentions expressed in such forward looking statements. These factors include, but are not limited to: the economic and financial conditions in Canada and globally; fluctuations in interest rates and currency values; liquidity; significant market volatility and interruptions; the failure of third parties to comply with their obligations to the Bank and its affiliates; the effect of changes in monetary policy; legislative and regulatory developments in Canada and elsewhere, including changes in tax laws; the effect of changes to the Bank s credit ratings; operational and reputational risks; the risk that the Bank s risk management models may not take into account all relevant factors; the accuracy and completeness of information the Bank receives on customers and counterparties; the timely development and introduction of new products and services in receptive markets; the Bank s ability to expand existing distribution channels and to develop and realize revenues from new distribution channels; the Bank s ability to complete and integrate acquisitions and its other growth strategies; changes in accounting policies and methods the Bank uses to report its financial condition and the results of its operations, including uncertainties associated with critical accounting assumptions and estimates; the effect of applying future accounting changes; global capital markets activity; the Bank s ability to attract and retain key executives; reliance on third parties to provide components of the Bank s business infrastructure; unexpected changes in consumer spending and saving habits; technological developments; fraud by internal or external parties, including the use of new technologies in unprecedented ways to defraud the Bank or its customers; consolidation in the Canadian financial services sector; competition, both from new entrants and established competitors; judicial and regulatory proceedings; acts of God, such as earthquakes and hurricanes; the possible impact of international conflicts and other developments, including terrorist acts and war on terrorism; the effects of disease or illness on local, national or international economies; disruptions to public infrastructure, including transportation, communication, power and water; and the Bank s anticipation of and success in managing the risks implied by the foregoing. A substantial amount of the Bank s business involves making loans or otherwise committing resources to specific companies, industries or countries. Unforeseen events affecting such borrowers, industries or countries could have a material adverse effect on the Bank s financial results, businesses, financial condition or liquidity. These and other factors may cause the Bank s actual performance to differ materially from that contemplated by forward-looking statements. For more information, see the discussion on pages 62 to 76 inclusive, of the Bank s 2008 Annual Report and those pages are incorporated herein by reference. The preceding list of important factors is not exhaustive. When relying on forward-looking statements to make decisions with respect to the Bank and its securities, investors and others should carefully consider the preceding factors, other uncertainties and potential events. The Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on its behalf. Documents Incorporated by Reference This prospectus supplement is deemed to be incorporated by reference into the accompanying short form base shelf prospectus of the Bank dated April 16, 2008, as amended by Amendment No. 1 dated December 3, 2008, solely for the purpose of the Preferred Shares Series 26 offered hereunder. Other documents are also incorporated or deemed to be incorporated by reference into the accompanying prospectus and reference should be made to the prospectus for full S-5

6 particulars. The following documents have been filed with the securities regulatory authorities in each province and territory of Canada and are specifically incorporated by reference into, and form an integral part of, this prospectus supplement: (a) the Bank s Annual Information Form dated December 8, 2008; (b) the Bank s Management Proxy Circular attached to the Notice of Meeting dated January 14, 2008; (c) (d) the Bank s consolidated financial statements for the years ended October 31, 2008 and 2007, together with the auditors report thereon; the Bank 's Management's Discussion and Analysis as contained in the Bank's Annual Report for the year ended October 31, 2008; and (e) the material change reports of the Bank dated December 5, 2008 and December 12, 2008, respectively, relating to the acquisition by the Bank of approximately 37% of the outstanding voting securities of CI Financial Income Fund for approximately $2.3 billion. Any statement contained in a document incorporated or deemed to be incorporated by reference in this prospectus supplement or the accompanying prospectus or contemplated in this prospectus supplement or the accompanying prospectus will be deemed to be modified or superseded for the purposes of this prospectus supplement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement will not to be deemed an admission for any purpose that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus supplement. Eligibility for Investment In the opinion of McCarthy Tétrault LLP, counsel for the Bank, and Osler, Hoskin & Harcourt LLP, counsel to the Underwriters, the Preferred Shares Series 26, if issued on the date of this prospectus supplement, would be, at that time, qualified investments under the Income Tax Act (Canada) (the Tax Act ) and the regulations thereunder for trusts governed by registered retirement savings plans, registered retirement income funds, registered education savings plans, deferred profit sharing plans, registered disability savings plans and, for trusts governed by tax-free savings accounts, provided that the Preferred Shares Series 26 are listed on a designated stock exchange under the Tax Act (such as the TSX) or, alternatively, if proposed amendments to regulations under the Tax Act are passed. Currency and Accounting Information dollars. Unless otherwise indicated, all dollar amounts appearing in this prospectus supplement are stated in Canadian Unless otherwise indicated, all amounts appearing under Earnings Coverage are derived from the consolidated financial statements of the Bank, which are presented in accordance with Canadian generally accepted accounting principles. Recent Events On December 12, 2008, the Bank and Sun Life Financial Inc. ( Sun Life ) completed the acquisition by the Bank of 104,609,895 trust units (the CI Units ) of CI Financial Income Fund from Sun Life for approximately $2.3 billion. The Bank satisfied the purchase price for the CI Units by way of (i) the issuance to an affiliate of Sun Life of 14,450,867 common shares of the Bank at a price of $34.60 per share and 10,000,000 Non-cumulative 6.25% 5-Year Rate Reset Preferred Shares Series 24 of the Bank ( Preferred Shares Series 24 ) at a price of $25.00 per share, and (ii) the payment to Sun Life and an affiliate of Sun Life of an aggregate of $1,551,417,690 in cash. Based upon publicly S-6

7 available information, the CI Units represented approximately 37% of the outstanding voting securities of CI Financial Income Fund on December 12, On January 2, 2009, CI Financial Income Fund publicly announced that, effective January 1, 2009, it had completed its conversion from an income trust to a corporate structure pursuant to a plan of arrangement under the Business Corporations Act (Ontario). Under the plan of arrangement, all of the units of CI Financial Income Fund were exchanged for common shares of CI Financial Corp. on a one-for-one basis. Based upon publicly available information, as a result of this conversion and after giving effect to a public offering of 15 million units of CI Financial Income Fund completed on December 30, 2008, the Bank owns approximately 35.5% of the outstanding common shares of CI Financial Corp. Description of Preferred Shares as a Class Details of the Offering The Preferred Shares Series 26 and the Preferred Shares Series 27 will each be issued as a series of preferred shares of the Bank. Reference is made to the description of the preferred shares of the Bank as a class under the heading Description of Preferred Shares in the accompanying prospectus. The authorized preferred share capital of the Bank consists of an unlimited number of preferred shares without nominal or par value. Certain Provisions of the Preferred Shares Series 26 as a Series The following is a summary of the rights, privileges, restrictions and conditions of or attaching to the Preferred Shares Series 26 as a series. Definition of Terms The following definitions are relevant to the Preferred Shares Series 26. Annual Fixed Dividend Rate means, for any Subsequent Fixed Rate Period, the rate (expressed as a percentage rate rounded down to the nearest one hundred thousandth of one percent (with % being rounded up)) equal to the sum of the Government of Canada Yield on the applicable Fixed Rate Calculation Date plus 4.14%. Bloomberg Screen GCAN5YR Page means the display designated as page GCAN5YR<INDEX> on the Bloomberg Financial L.P. service (or such other page as may replace the GCAN5YR page on that service) for purposes of displaying Government of Canada Bond yields. Fixed Rate Calculation Date means, for any Subsequent Fixed Rate Period, the 30 th day prior to the first day of such Subsequent Fixed Rate Period. Government of Canada Yield on any date means the yield to maturity on such date (assuming semi-annual compounding) of a Canadian dollar denominated non-callable Government of Canada bond with a term to maturity of five years as quoted as of 10:00 a.m. (Toronto time) on such date and which appears on the Bloomberg Screen GCAN5YR Page on such date; provided that, if such rate does not appear on the Bloomberg Screen GCAN5YR Page on such date, the Government of Canada Yield will mean the average of the yields determined by two registered Canadian investment dealers, other than Scotia Capital Inc., selected by the Bank, as being the yield to maturity on such date (assuming semi-annual compounding) which a Canadian dollar denominated non-callable Government of Canada bond would carry if issued in Canadian dollars at 100% of its principal amount on such date with a term to maturity of five years. Initial Fixed Rate Period means the period commencing on the Closing Date and ending on and including April 25, Subsequent Fixed Rate Period means for the initial Subsequent Fixed Rate Period, the period commencing April 26, 2014 and ending on and including April 25, 2019 and for each succeeding Subsequent Fixed Rate S-7

8 Dividends Period, the period commencing on the day immediately following the end of the immediately preceding Subsequent Fixed Rate Period and ending on and including April 25 in the fifth year thereafter. During the Initial Fixed Rate Period, the holders of the Preferred Shares Series 26 will be entitled to receive fixed quarterly non-cumulative preferential cash dividends, as and when declared by the Board of Directors, subject to the provisions of the Bank Act, on the third last business day of January, April, July and October in each year (other than January 28, 2009), at an annual rate equal to $ per share. The initial dividend, if declared, will be payable April 28, 2009 and will be $ per share, based on the anticipated Closing Date of January 21, During each Subsequent Fixed Rate Period after the Initial Fixed Rate Period, the holders of Preferred Shares Series 26 will be entitled to receive fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors, subject to the provisions of the Bank Act, payable quarterly on the third last business day of January, April, July and October in each year, in the amount per share per annum determined by multiplying the Annual Fixed Dividend Rate applicable to such Subsequent Fixed Rate Period by $ The Annual Fixed Dividend Rate applicable to a Subsequent Fixed Rate Period will be determined by the Bank on the Fixed Rate Calculation Date. Such determination will, in the absence of manifest error, be final and binding upon the Bank and upon all holders of Preferred Shares Series 26. The Bank will, on the Fixed Rate Calculation Date, give written notice of the Annual Fixed Dividend Rate for the ensuing Subsequent Fixed Rate Period to the registered holders of the then outstanding Preferred Shares Series 26. If the Board of Directors does not declare a dividend, or any part thereof, on the Preferred Shares Series 26 on or before the dividend payment date for a particular quarter, then the entitlement of the holders of the Preferred Shares Series 26 to receive such dividend, or to any part thereof, for such quarter will be forever extinguished. Redemption The Preferred Shares Series 26 will not be redeemable prior to April 26, Subject to the provisions of the Bank Act and to the prior consent of the Superintendent and to the provisions described below under the heading Restrictions on Dividends and Retirement of Shares, on April 26, 2014 and on April 26 every five years thereafter, the Bank may redeem all or any part of the then outstanding Preferred Shares Series 26, at the Bank s option without the consent of the holder, by the payment of an amount in cash for each such share so redeemed of $25.00 together with all declared and unpaid dividends to the date fixed for redemption. Notice of any redemption will be given by the Bank at least 30 days and not more than 60 days prior to the date fixed for redemption. If less than all the outstanding Preferred Shares Series 26 are at any time to be redeemed, the shares to be redeemed will be redeemed pro rata, disregarding fractions. See Bank Act Restrictions and Restrictions on Payment of Dividends in the accompanying prospectus. Conversion of Preferred Shares Series 26 into Preferred Shares Series 27 Holders of Preferred Shares Series 26 will have the right, at their option, on April 26, 2014 and on April 26 every five years thereafter (a Series 26 Conversion Date ), to convert, subject to the restrictions on conversion described below and the payment or delivery to the Bank of evidence of payment of the tax (if any) payable, all or any of their Preferred Shares Series 26 registered in their name into Preferred Shares Series 27 on the basis of one Preferred Share Series 27 for each Preferred Share Series 26. The conversion of Preferred Shares Series 26 may be effected upon notice given not earlier than the 30 th day prior to, but not later than 5:00 p.m. (Toronto time) on the 15 th day preceding, a Series 26 Conversion Date. The Bank will, at least 30 days and not more than 60 days prior to the applicable Series 26 Conversion Date, give notice in writing to the then registered holders of the Preferred Shares Series 26 of the above-mentioned conversion right. On the 30th day prior to each Series 26 Conversion Date, the Bank will give notice in writing to the then registered holders of the Preferred Shares Series 26 of the Annual Fixed Dividend Rate for the next succeeding Subsequent Fixed Rate Period. S-8

9 Holders of Preferred Shares Series 26 will not be entitled to convert their shares into Preferred Shares Series 27 if the Bank determines that there would remain outstanding on a Series 26 Conversion Date less than 1,000,000 Preferred Shares Series 27, after having taken into account all Preferred Shares Series 26 tendered for conversion into Preferred Shares Series 27 and all Preferred Shares Series 27 tendered for conversion into Preferred Shares Series 26. The Bank will give notice in writing thereof to all registered holders of Preferred Shares Series 26 at least seven days prior to the applicable Series 26 Conversion Date. Furthermore, if the Bank determines that there would remain outstanding on a Series 26 Conversion Date less than 1,000,000 Preferred Shares Series 26, after having taken into account all Preferred Shares Series 26 tendered for conversion into Preferred Shares Series 27 and all Preferred Shares Series 27 tendered for conversion into Preferred Shares Series 26, then, all, but not part, of the remaining outstanding Preferred Shares Series 26 will automatically be converted into Preferred Shares Series 27 on the basis of one Preferred Share Series 27 for each Preferred Share Series 26 on the applicable Series 26 Conversion Date and the Bank will give notice in writing thereof to the then registered holders of such remaining Preferred Shares Series 26 at least seven days prior to the Series 26 Conversion Date. Upon the exercise by the holder of this right to convert Preferred Shares Series 26 into Preferred Shares Series 27 (and upon an automatic conversion), the Bank reserves the right not to issue Preferred Shares Series 27 to any person whose address is in, or whom the Bank or its transfer agent has reason to believe is a resident of, any jurisdiction outside Canada, to the extent that such issue would require the Bank to comply with the registration, prospectus, filing or other similar requirements under the applicable securities laws of such jurisdiction. See also Bank Act Restrictions and Restrictions on Payment of Dividends in the accompanying prospectus. If the Bank gives notice to the registered holders of the Preferred Shares Series 26 of the redemption of all the Preferred Shares Series 26, the Bank will not be required to give notice as provided hereunder to the registered holders of the Preferred Shares Series 26 of an Annual Fixed Dividend Rate or of the conversion right of holders of Preferred Shares Series 26 and the right of any holder of Preferred Shares Series 26 to convert such Preferred Shares Series 26 will cease and terminate in that event. Purchase for Cancellation Subject to the provisions of the Bank Act, the prior consent of the Superintendent, and the provisions described below under the heading Restrictions on Dividends and Retirement of Shares, the Bank may at any time purchase for cancellation any Preferred Share Series 26 in the open market at the lowest price or prices at which in the opinion of the Board of Directors such shares are obtainable. Restrictions on Dividends and Retirement of Shares So long as any of the Preferred Shares Series 26 are outstanding, the Bank will not, without the approval of the holders of outstanding Preferred Shares Series 26 given as specified below: (a) (b) (c) (d) pay any dividends on the Common Shares of the Bank or any other shares ranking junior to the Preferred Shares Series 26 (other than stock dividends payable in shares ranking junior to the Preferred Shares Series 26); redeem, purchase or otherwise retire any Common Shares of the Bank or any other shares ranking junior to the Preferred Shares Series 26 (except out of the net cash proceeds of a substantially concurrent issue of shares ranking junior to the Preferred Shares Series 26); redeem, purchase or otherwise retire less than all the Preferred Shares Series 26; or except pursuant to any purchase obligation, sinking fund, retraction privilege or mandatory redemption provisions attaching to any series of preferred shares of the Bank, redeem, purchase or otherwise retire any other shares ranking on a parity with the Preferred Shares Series 26; unless, in each such case, all dividends up to and including the dividend payment date for the last completed period for which dividends will be payable will have been declared and paid or set apart for payment in respect of each series of cumulative preferred shares of the Bank then issued and outstanding and on all other cumulative shares ranking on a parity with the preferred shares of the Bank and there will have been paid or set apart for payment all declared dividends S-9

10 in respect of each series of non-cumulative preferred shares of the Bank (including the Preferred Shares Series 26) then issued and outstanding and on all other non-cumulative shares ranking on a parity with the preferred shares of the Bank. Issue of Additional Series of Preferred Shares The Bank may issue other series of preferred shares ranking on a parity with the Preferred Shares Series 26 without the authorization of the holders of the Preferred Shares Series 26. Amendments to Preferred Shares Series 26 The Bank will not, without the approval of the holders of the Preferred Shares Series 26 given as specified below under Shareholder Approvals, delete or vary any rights, privileges, restrictions and conditions attaching to the Preferred Shares Series 26. In addition to the aforementioned approval, the Bank will not without, but may from time to time with, the prior approval of the Superintendent, make any such deletion or variation which might affect the classification afforded the Preferred Shares Series 26 from time to time for capital adequacy requirements pursuant to the Bank Act and the regulations and guidelines thereunder. Shareholder Approvals The approval of any amendments to the rights, privileges, restrictions and conditions attaching to the Preferred Shares Series 26 may be given by a resolution carried by the affirmative vote of not less than 66⅔% of the votes cast at a meeting of holders of Preferred Shares Series 26 at which a majority of the outstanding Preferred Shares Series 26 is represented or, if no such quorum is present at such meeting, at any adjourned meeting at which shareholders then present or represented by proxy would form the necessary quorum. Rights on Liquidation In the event of the liquidation, dissolution or winding-up of the Bank, the holders of the Preferred Shares Series 26 will be entitled to receive $25.00 per share together with all dividends declared and unpaid to the date of payment before any amount will be paid or any assets of the Bank distributed to the holders of any shares ranking junior to the Preferred Shares Series 26. The holders of the Preferred Shares Series 26 will not be entitled to share in any further distribution of the assets of the Bank. Voting Rights Subject to the provisions of the Bank Act, the holders of Preferred Shares Series 26 as such will not be entitled to receive notice of, attend, or vote at, any meeting of the shareholders of the Bank unless and until the first time at which the Board of Directors has not declared the whole dividend on the Preferred Shares Series 26 in respect of any quarter. In that event, the holders of Preferred Shares Series 26 will be entitled to receive notice of, and to attend, meetings of shareholders at which directors of the Bank are to be elected and will be entitled to one vote for each Preferred Share Series 26 held. The voting rights of the holders of the Preferred Shares Series 26 will forthwith cease upon payment by the Bank of the first dividend on the Preferred Shares Series 26 to which the holders are entitled subsequent to the time such voting rights first arose until such time as the Bank may again fail to declare the whole dividend on the Preferred Shares Series 26 in respect of any quarter, in which event such voting rights will become effective again and so on from time to time. In connection with any action to be taken by the Bank which requires the approval of the holders of Preferred Shares Series 26 voting as a series or as part of the class, each such share will entitle the holder thereof to one vote. Tax Election The Preferred Shares Series 26 will be taxable preferred shares as defined in the Income Tax Act (Canada) (the "Tax Act"). The terms of the Preferred Shares Series 26 will require the Bank to make the necessary election under Part VI.1 of the Tax Act so that corporate holders will not be subject to the tax under Part IV.1 of the Tax Act on dividends received (or deemed to be received) on the Preferred Shares Series 26. S-10

11 Business Days If any action is required to be taken by the Bank on a day that is not a business day, then such action will be taken on the next succeeding day that is a business day. Certain Provisions of the Preferred Shares Series 27 as a Series The following is a summary of the rights, privileges, restrictions and conditions of or attaching to the Preferred Shares Series 27 as a series. Definition of Terms Issue Price Dividends The following definitions are relevant to the Preferred Shares Series 27. Floating Quarterly Dividend Rate means, for any Quarterly Floating Rate Period, the rate (expressed as a percentage rate rounded down to the nearest one hundred thousandth of one percent (with % being rounded up)) equal to the sum of the T-Bill Rate on the applicable Floating Rate Calculation Date plus 4.14% (calculated on the basis of the actual number of days elapsed in such Quarterly Floating Rate Period divided by 365). Floating Rate Calculation Date means, for any Quarterly Floating Rate Period, the 30 th day prior to the first day of such Quarterly Floating Rate Period. Quarterly Commencement Date means the 26 th day of each of January, April, July and October in each year. Quarterly Floating Rate Period means, for the initial Quarterly Floating Rate Period, the period commencing on April 26, 2014 and ending on and including July 25, 2014, and thereafter the period from and including the day immediately following the end of the immediately preceding Quarterly Floating Rate Period to but excluding the next succeeding Quarterly Commencement Date. T-Bill Rate means, for any Quarterly Floating Rate Period, the average yield expressed as a percentage per annum on three month Government of Canada Treasury Bills, as reported by the Bank of Canada, for the most recent treasury bills auction preceding the applicable Floating Rate Calculation Date. The Preferred Shares Series 27 will have an issue price of $25.00 per share. The holders of the Preferred Shares Series 27 will be entitled to receive floating rate non-cumulative preferential cash dividends as and when declared by the Board of Directors, subject to the provisions of the Bank Act, payable quarterly on the third last business day of January, April, July and October in each year, in the amount per share determined by multiplying the applicable Floating Quarterly Dividend Rate by $ The Floating Quarterly Dividend Rate for each Quarterly Floating Rate Period will be determined by the Bank on the 30 th day prior to the first day of each Quarterly Floating Rate Period. Such determination will, in the absence of manifest error, be final and binding upon the Bank and upon all holders of Preferred Shares Series 27. The Bank will, on the Floating Rate Calculation Date, give written notice of the Floating Quarterly Dividend Rate for the ensuing Quarterly Floating Rate Period to all registered holders of the then outstanding Preferred Shares Series 27. If the Board of Directors does not declare a dividend, or any part thereof, on the Preferred Shares Series 27 on or before the dividend payment date for a particular Quarterly Floating Rate Period, then the entitlement of the holders of the Preferred Shares Series 27 to receive such dividend, or to any part thereof, for such Quarterly Floating Rate Period will be forever extinguished. S-11

12 Redemption Subject to the provisions of the Bank Act and to the prior consent of the Superintendent and to the provisions described below under the heading Restrictions on Dividends and Retirement of Shares, on not more than 60 nor less than 30 days notice, the Bank may redeem all or any part of the then outstanding Preferred Shares Series 27, at the Bank s option without the consent of the holder, by the payment of an amount in cash for each such share so redeemed of (i) $25.00 together with all declared and unpaid dividends to the date fixed for redemption in the case of redemptions on April 26, 2019 and on April 26 every five years thereafter, or (ii) $25.50 together with all declared and unpaid dividends to the date fixed for redemption in the case of redemptions on any other date after April 26, Notice of any redemption will be given by the Bank at least 30 days and not more than 60 days prior to the date fixed for redemption. If less than all the outstanding Preferred Shares Series 27 are at any time to be redeemed, the shares to be redeemed will be redeemed pro rata, disregarding fractions. See Bank Act Restrictions and Restrictions on Payment of Dividends in the accompanying prospectus. Conversion of Preferred Shares Series 27 into Preferred Shares Series 26 Holders of Preferred Shares Series 27 will have the right, at their option, on April 26, 2019 and on April 26 every five years thereafter (a Series 27 Conversion Date ), to convert, subject to the restrictions on conversion described below and the payment or delivery to the Bank of evidence of payment of the tax (if any) payable, all or any of their Preferred Shares Series 27 registered in their name into Preferred Shares Series 26 on the basis of one Preferred Share Series 26 for each Preferred Share Series 27. The conversion of Preferred Shares Series 27 may be effected upon notice given not earlier than the 30 th day prior to, but not later than 5:00 p.m. (Toronto time) on the 15 th day preceding, a Series 27 Conversion Date. The Bank will, at least 30 days and not more than 60 days prior to the applicable Series 27 Conversion Date, give notice in writing to the then registered holders of the Preferred Shares Series 27 of the above-mentioned conversion right. On the 30 th day prior to each Series 27 Conversion Date, the Bank will give notice in writing to the then registered holders of Preferred Shares Series 27 of the Annual Fixed Dividend Rate for the next succeeding Subsequent Fixed Rate Period. Holders of Preferred Shares Series 27 will not be entitled to convert their shares into Preferred Shares Series 26 if the Bank determines that there would remain outstanding on a Series 27 Conversion Date less than 1,000,000 Preferred Shares Series 26, after having taken into account all Preferred Shares Series 27 tendered for conversion into Preferred Shares Series 26 and all Preferred Shares Series 26 tendered for conversion into Preferred Shares Series 27. The Bank will give notice in writing thereof to all registered holders of the Preferred Shares Series 27 at least seven days prior to the applicable Series 27 Conversion Date. Furthermore, if the Bank determines that there would remain outstanding on a Series 27 Conversion Date less than 1,000,000 Preferred Shares Series 27, after having taken into account all Preferred Shares Series 27 tendered for conversion into Preferred Shares Series 26 and all Preferred Shares Series 26 tendered for conversion into Preferred Shares Series 27, then, all, but not part, of the remaining outstanding Preferred Shares Series 27 will automatically be converted into Preferred Shares Series 26 on the basis of one Preferred Share Series 26 for each Preferred Share Series 27 on the applicable Series 27 Conversion Date and the Bank will give notice in writing thereof to the then registered holders of such remaining Preferred Shares Series 27 at least seven days prior to the Series 27 Conversion Date. Upon the exercise by the holder of this right to convert Preferred Shares Series 27 into Preferred Shares Series 26 (and upon an automatic conversion), the Bank reserves the right not to issue Preferred Shares Series 26 to any person whose address is in, or whom the Bank or its transfer agent has reason to believe is a resident of, any jurisdiction outside Canada, to the extent that such issue would require the Bank to comply with the registration, prospectus, filing or other similar requirements under the applicable securities laws of such jurisdiction. See also Bank Act Restrictions and Restrictions on Payment of Dividends in the accompanying prospectus. If the Bank gives notice to the registered holders of the Preferred Shares Series 27 of the redemption on a Series 27 Conversion Date of all the Preferred Shares Series 27, the Bank will not be required to give notice as provided hereunder to the registered holders of the Preferred Shares Series 27 of an Annual Fixed Dividend Rate or of the conversion right of holders of Preferred Shares Series 27 and the right of any holder of Preferred Shares Series 27 to convert such Preferred Shares Series 27 will cease and terminate in that event. S-12

13 Purchase for Cancellation Subject to the provisions of the Bank Act, the prior consent of the Superintendent and the provisions described below under the heading Restrictions on Dividends and Retirement of Shares, the Bank may at any time purchase for cancellation any of the Preferred Shares Series 27 in the open market at the lowest price or prices at which in the opinion of the Board of Directors such shares are obtainable. Restrictions on Dividends and Retirement of Shares So long as any of the Preferred Shares Series 27 are outstanding, the Bank will not, without the approval of the holders of outstanding Preferred Shares Series 27 given as specified below: (a) (b) (c) (d) pay any dividends on the Common Shares of the Bank or any other shares ranking junior to the Preferred Shares Series 27 (other than stock dividends payable in shares of the Bank ranking junior to the Preferred Shares Series 27); redeem, purchase or otherwise retire any Common Shares of the Bank or any other shares ranking junior to the Preferred Shares Series 27 (except out of the net cash proceeds of a substantially concurrent issue of shares ranking junior to the Preferred Shares Series 27); redeem, purchase or otherwise retire less than all the Preferred Shares Series 27 then outstanding; or except pursuant to any purchase obligation, sinking fund, retraction privilege or mandatory redemption provisions attaching to any series of preferred shares of the Bank, redeem, purchase or otherwise retire any other shares ranking on a parity with the Preferred Shares Series 27; unless, in each such case, all dividends up to and including the dividend payment date for the last completed period for which dividends will be payable will have been declared and paid or set apart for payment in respect of each series of cumulative preferred shares of the Bank then issued and outstanding and on all other cumulative shares ranking on a parity with the preferred shares of the Bank and there will have been paid or set apart for payment all declared dividends in respect of each series of non-cumulative preferred shares of the Bank (including the Preferred Shares Series 27) then issued and outstanding and on all other non-cumulative shares ranking on a parity with the preferred shares of the Bank. Issue of Additional Series of Preferred Shares The Bank may issue other series of preferred shares ranking on a parity with the Preferred Shares Series 27 without the authorization of the holders of the Preferred Shares Series 27. Amendments to Preferred Shares Series 27 The Bank will not, without the approval of the holders of the Preferred Shares Series 27 given as specified below under Shareholder Approvals, delete or vary any rights, privileges, restrictions and conditions attaching to the Preferred Shares Series 27. In addition to the aforementioned approval, the Bank will not without, but may from time to time with, the prior approval of the Superintendent, make any such deletion or variation which might affect the classification afforded the Preferred Shares Series 27 from time to time for capital adequacy requirements pursuant to the Bank Act and the regulations and guidelines thereunder. Shareholder Approvals The approval of any amendments to the rights, privileges, restrictions and conditions attaching to the Preferred Shares Series 27 may be given by a resolution carried by the affirmative vote of not less than 66⅔% of the votes cast at a meeting of holders of Preferred Shares Series 27 at which a majority of the outstanding Preferred Shares Series 27 is represented or, if no such quorum is present at such meeting, at any adjourned meeting at which shareholders then present or represented by proxy would form the necessary quorum. S-13